CAPS Playbook: Rating Graphs

I'll be writing a series of short articles to share with my fellow Fools all the tips and tricks I've yet discovered for getting the maximum profit, learning, and fun from our Motley Fool CAPS investment service. I consider each a "play" in the CAPS Playbook we're building for you. Make sense? Ready to join in? Here's the next one.

I did something new today: I rated a stock purely based on the trend behind a Motley Fool CAPS star rating. And I think I'm going to be right. Let me explain.

I noticed that as of Jan. 1, this stock was rated with five stars on CAPS (the top quintile). It then dropped to four stars in early February and three stars by early March. Now, in April, it sits at just two stars. Since Jan. 1, the share price itself is unchanged -- but this stock has fallen in our community's esteem quite dramatically. I'll tell you the name of the stock -- maybe you own it? -- in a minute, but first, let me explain how to check this information for your stocks.

Look up any ticker you like (or type in the company's name) in CAPS.

In the Stock Trends section -- just looking for the stock graph on each stock's CAPS page -- there's a new tab titled "CAPS RATING." Click it.

As you'd expect, some stocks change very little. Unit Corp. (NYSE: UNT) , the oil and natural-gas driller, has been a five-star stock every single day since November. In fact, it's one of the highest-rated stocks among the 4,365 now rated in CAPS. Similarly, Satyam Computer Services (NYSE: SAY) , the Indian software company and popular outsourcing choice -- up 9% as I write, thanks to the great earnings it announced today -- has been a five-star stock since last December, and its rating has never slipped below four stars.

By contrast, a small cap like Cambridge Display Technology (Nasdaq: OLED) , which is driving adoption of organic light-emitting diode displays, has been rated anywhere between one and four stars over the past five months. You can follow these trends, and learn from them, by visiting the CAPS Rating graph on every page.

So which stock do I predict will underperform the S&P 500 over the next six to 12 months? Live Nation (NYSE: LYV) , the $1.4 billion entertainment promoter and operator of concert venues, including the House of Blues chain. I'm not predicting that it's going down, necessarily. No gloom-and-doom portents from this Fool -- indeed, Live Nation has rocked the market, having doubled since its initial public offering at the end of 2005. But the CAPS community and I are saying here that:

From its present perch at $22, we think Live Nation will underperform the S&P 500 for the next year or so.

There are better places to put your money right now.

Disagree with me? Check out my CAPS page -- I'm TMFBreakerDave -- over the next few months to see how my underperform rating for Live Nation holds up.

It's one thing to see a stock with a two-star CAPS rating. But it's even more interesting to know the trend behind that rating. Take a look at your CAPS rating graphs, and follow along with the investors who've now rated one or more stocks on Motley Fool CAPS. We're building the world's most valuable community intelligence database. You and I can not only contribute to it, but also learn from it, every day.

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